Which On-Chain Metrics Should You Look At?

September 24, 2022

Photo by Myriam Jessier on Unsplash

As blockchain data becomes more publicly available, numerous types of on-chain metrics emerge. Examples of two robust and widely used on-chain metrics are the Bitcoin HODL Waves and the Bitcoin Realized HODL Ratio.

Bitcoin HODL Waves

HODL Waves is a Bitcoin on-chain metric chart that uses blockchain data to display the amount of bitcoin in circulation broken down into age bands. Age bands represent the total amount of bitcoin that was last moved within a certain time period, as denoted in the legend in the chart below. HODL waves employ various colors to depict the different age bands and how the amount of bitcoin in each band changes over time, resulting in wave-like patterns on the chart.

The amount of Bitcoin last moved between wallets is grouped into different timeframe bands as depicted on the chart. The following are the timeframes:

  • 24hr
  • 1 day - 1 week
  • 1 week - 1 month
  • 1 month - 3 months
  • 3 months - 6 months
  • 6 months - 12 months
  • 1 year - 2 years
  • 2 years - 3 years
  • 3 years - 5 years
  • 5 years - 7 years
  • 7 years - 10 years
  • +10 years

As seen in the chart, the lower x-axis shows a time period since bitcoin's inception in 'years,' while the left y-axis represents the percentage of bitcoin moved in a time period ranging from 0 to 100 percent. The black line denotes the BTC price in the chart, and the colors of the areas in the chart correspond to the age bands.

For instance, the chart shows roughly 80% of the bitcoin supply has moved within the past seven years.

The HODL Waves metric can assist us in comprehending Bitcoin market cycles. This kind of on-chain metric aids in everyone’s investing and trading decisions by giving us an idea of how the different market players, such as short-term and long-term holders, act in various market cycles.

Bitcoin Realized HODL Ratio

The Realized HODL Ratio (RHODL) metric employs a Realized Value HODL Waves ratio. Specifically, the metric looks at the ratio between the 1 week and 1-2 year Realized Cap HODL bands. It takes into account increased supply by weighing the ratio by the total market age. If the RHODL ratio is high, then it suggests that the market is overheated; this is used to determine cycle tops.

The left and right Y-axes show the Bitcoin price, while the X-axis shows a time period in years. The black line is the Bitcoin price, and the yellow line is the RHODL ratio.

When the RHODL ratio enters the red band, it indicates that the market is nearing the end of a bull cycle. Conversely, when the RHODL ratio enters the green band, it is an indication that a bear cycle is about to be over. 

For example, it can be seen in the chart that the RHODL ratio was able to capture the market top in 2018, and the market bottom in 2019. Historically, the metric has been able to identify market conditions from BTC price ever since its existence.

The charts above are just some of the various on-chain metrics you can supplement to your investing or trading decisions. In case you are interested in exploring other on-chain metrics, sites like Glassnode and IntoTheBlock offer contextualized and actionable market insights, reports, and analyses based on the on-chain metrics.








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